Asia’s factories were squeezed into China’s new bailouts

Workers work on a production line of aluminum rolls at a factory in Zhuping, China’s Shandong province, on November 23, 2019. Picture taken on November 23, 2019. REUTERS/Stringer/File Photo Get license rights

  • China’s October private PMI marks the first contraction since July
  • Factory activity in Japan and South Korea continues to be sluggish
  • Surveys underscore Asia’s weak economic recovery

Tokyo, Nov. 1 (Reuters) – Asia’s manufacturers faced worsening pressure in October as factory activity in China slipped back into decline, clouding recovery prospects for the region’s main exporters already squeezed by weak global demand and high prices.

Purchasing managers’ indices (PMIs) for manufacturing powerhouses China, Japan and South Korea showed activity contracting, while Vietnam and Malaysia struggled with the widening fallout from the Chinese recession.

China’s Caixin/S&P Global manufacturing PMI fell to 49.5 in October from 50.6 in September, a private sector survey showed on Wednesday, falling below the 50.0 point threshold that separates growth from contraction.

The Chinese survey echoed a lower official PMI reading on Tuesday that showed an unexpected contraction in activity, casting doubt on recent hopes for a recovery in the world’s second-largest economy.

“Overall, manufacturers are not very upbeat in October,” Wang Xe, an economist at Caixin Insight Group, said of China’s survey results.

“The economy has shown signs of bottoming out, but the foundation of the recovery is not solid. Demand is weak, there are many internal and external uncertainties, and expectations are still weak.”

The impact of China’s slowdown is being felt in countries such as Japan and South Korea, whose manufacturers rely heavily on demand from the Asian giant.

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Japan’s factory activity contracted for a fifth straight month in October, the final au Jibun Bank PMI showed.

A day after official figures showed that Japan’s factory output rose less than expected in September, demand eased significantly.

Japanese machine makers Fanuc ( 6954.T ) and Murata Manufacturing ( 6981.T ) recently reported weak six-month earnings due to sluggish Chinese demand.

South Korea’s factory activity fell for a 16th straight month, while Taiwan, Vietnam and Malaysia’s PMIs also showed continued declines in activity.

India’s factory activity growth slowed for the second month in a row in October as demand and rising raw material prices weighed on business confidence.

“October PMIs for emerging Asia generally retreated further into contraction territory,” said Sivan Tandon, emerging Asia economist at Capital Economics.

“The outlook for manufacturing in the region remains bleak in recent times as high inventory levels and weak foreign demand are set to dampen production.”

The International Monetary Fund (IMF) has warned that China’s weak recovery and the risk of a more prolonged asset crisis could further erode Asia’s economic prospects.

In its World Economic Outlook released last month, the IMF cut its growth estimate for Asia next year to 4.2% from 4.4% in April, down from its 4.6% forecast for this year.

Report by Laika Kihara. Editing by Sam Holmes

Our Standards: Thomson Reuters Trust Principles.

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